UK employment rises but wage growth erratic

(ShareCast News) - UK wage growth picked up slightly as employment grew sharply in the three months to November, official data showed on Wednesday, helping lift the pound to a new 19-month high.

The unemployment rate remained at 4.3% for the sixth successive month, but the number of people in work increased by 102,000 when it had been forecast to drop.

Average wage growth, excluding bonuses, for the three-month period were 2.4% higher than the same period a year earlier, an improvement on the 2.3% rate from a month before and on the market's expectations for this rate to be repeated. Growth in total weekly earnings, including bonuses, remained at 2.5% as economists had forecast.

More timely data from December showed the seasonally adjusted claimant count rate increased to 2.4% from 2.3% in November. The claimant count increased by 8,600 after a gain of 5,900 the month before.

"With the employment rate returning to a joint record high and the number of vacancies setting a new record, demand for workers clearly remains strong," said senior ONS statistician David Freeman. "Moreover, economic inactivity is at its lowest since the winter of 2000-01."

Nevertheless inflation was reported last week at much higher rate than wage growth, with CPI at 3% and RPI above 4%, so the real value of earnings continues to decline to keep up the crunch on households.

The pound hit a new post-Brexit high against the dollar of 1.41 immediately after the numbers were released, and was up 0.3% versus the euro at 1.1421.

"The latest labour market figures provided further reassurance that the economy held up in the fourth quarter of last year," said economist Paul Hollingsworth at Capital Economics. He said the 102,000 rise in employment dispelled concerns that weakness in recent months was a sign of things to come.

"With an unusually weak sample in the first month of each quarter still weighing on the data for now, and hiring surveys remaining strong, a further acceleration in employment growth looks likely in the near term," he said.

Market analyst Jasper Lawler at London Capital Group said the recent rally in sterling, which has seen it jump over 3% in the last 10 days, was "looking durable".

"The good news for the economy is that more people are working with rising wages despite any uncertainty associated with leaving the European Union. Lord Jim O'Neil looks vindicated so far in his belief that strong domestic and global growth will overcome Brexit headwinds."

Economist Sam Tombs at Pantheon Macroeconomics noted that while three-month wage growth improved, the month of November saw wage growth fall to 2.3%.

But looking at the year-on-year rate of private sector wage growth, excluding bonuses, this edged up to 3.4% for the three months to November, from 3.3% in October and "so it won't be long before the headline rate also rises towards 3%".

But he said the modest recovery of wages and the slow take-up of slack in the labour market would enable the Bank of England's monetary policy committee "to take a long pause before the next interest rate increase", maybe November.